Econ Exam Two and Three
Suppose that velocity of circulation is 3 and the quantity of money is $500 million. According to the quantity theory of money, GDP equals __________.
$1.5 billion
An economy has no imports and no taxes. The marginal propensity to save is 0.2. A ______ increase in autonomous expenditure increases equilibrium expenditure by $60 billion. The multiplier is ______.
$12 billion; 5.00
If the CPI was 207 in 2007 and 225 in 2011, what pay raise would someone who earned $50,000 in income in 2007 have to receive in order to keep her purchasing power constant in 2011?
$4,348
If the marginal propensity to save (MPS) is 0.2, how much additional consumption will result from an increase of $100 billion in disposable income?
$80 billion
CPI = ______.
(Cost of CPI basket at current-period prices/Cost of CPI basket at base-period prices) x 100
Suppose the CPI in 2008 was 215.3 and the CPI in 2009 was 214.6, what was the inflation rate between 2008 and 2009?
-0.3 percent
If disposable income increases from $4 trillion to $7 trillion, saving increases from $1.5 trillion to $2 trillion, and nothing else changes, the marginal propensity to save is _____.
0.17
In February 2018, the real interest rate was ___ percent.
1.68
If the exchange rate between the U.S. dollar and the Japanese yen is $1 = 100 yen, the price level in the United States is 90 and the price level in Japan is 100, what is the real exchange rate?
90
In the real business cycle model, which of these best explains an increase in real GDP above the full-employment level?
A positive technology shock
Choose the statement that is incorrect.
Along the LAS curve the money wage rate is constant and the real wage rate rises as the price level rises.
How can government policies shift the aggregate demand curve to the right?
By increasing government purchases
The marginal propensity to consume is equal to ______, and the marginal propensity to save is equal to ______.
C/D; S/Y (all with delta)
What is the largest component of M1?
Checkable deposits
Which of these factors can cause the natural rate of unemployment to change?
Demographic changes
Which of the following is a determinant of exchange rates?
Expected future exchange rate
Of the eight categories in the CPI market basket, which three categories make up more than 70% of the basket?
Housing, transportation, and food
Which of these terms refers to the accumulated knowledge and skills workers acquire from education and training, or with life experiences?
Human capital
Choose the statement that is incorrect.
If a financial institution's net worth is positive, the institution must be solvent and liquid.
Choose the correct statement about purchasing power parity.
If purchasing power parity does not prevail, the demand for U.S. dollars changes and the supply of U.S. dollars changes.
Choose the statement about fixed exchange rates that is incorrect.
If the Fed wanted to fix the U.S. dollar exchange rate against the Japanese yen, the Fed would have to buy U.S. dollars to prevent the exchange rate from rising above the target value.
Government policies can help to reduce the levels of frictional and structural unemployment, but they can also help to increase them. Which of these policies can cause an increase in the levels of frictional and structural unemployment?
Increasing the minimum wage
Choose the statement about money that is incorrect.
Inflation brings a rising value of money.
Which of these is most likely to increase productivity?
Investments in research and development
The actions the Federal Reserve takes to manage the money supply and interest rates in order to pursue economic objectives are called __________.
Monetary policy
Which of these policies affects the economy through intended changes in the quantity of money and interest rates?
Monetary policy
Choose the statement that is incorrect.
Most economists believe that the Ricardo-Barro effect holds in the loanable funds market.
Which of these factors does not contribute to economic growth?
Nationalization of foreign investments
The main sources of bias in the CPI are ______.
New goods bias, quality change bias, commodity substitution bias, and outlet substitution bias
______ sees the economy as a perpetual motion machine.
New growth theory
The role of technological progress in determining economic growth can be described by which statement?
Per capita output will rise when we discover new and more effective uses of capital and labor.
When we say that money serves as a unit of account, we mean that:
Prices are quoted in terms of money.
Which of these government policies can help economic growth?
Promoting higher rates of saving
According to the ____ theory of business cycles, a change in the monetary growth rate has no effect on real GDP.
Real Business Cycle
What is the largest component of M2?
Savings deposits
I = ______.
S + (T - G) + (M - X)
Choose the statement about the Fed that is incorrect.
The policy decisions of the Federal Open Market Committee are implemented each month by a different Federal Reserve Bank.
Choose the statement that is incorrect.
The presence of a banking system in Britain in the middle 1700s started the Industrial Revolution.
Which of these groups is included in the labor force?
The unemployed
Which of these are included in the labor force?
Those who are employed and those who are unemployed
When is the opportunity cost of holding money higher?
When interest rates are high
The output gap in the graph is ______ because ______.
an inflationary gap; potential GDP is less than real GDP
The expansion of 2002-2008 created jobs at ______ rate. The first two years of the expansion created few jobs because ______.
an unusually slow; the expansion was very weak, so employment growth was weak
Over time, on average the demand for loanable funds ______, so the real interest rate ______.
and the supply of loanable funds increase at a similar pace; has no trend
A rise in the price of oil creates _______.
a one-time cost-push rise in the price level
A sustained decrease in the average level of prices in the economy is __________.
called deflation
Changes in consumption spending play a large role in the business cycle because _______ accounts for approximately ______ percent of GDP.
consumption expenditure; 70
Interest rate parity means ______.
equal rates of return
The quantity of labor demanded is the number of labor hours ______________ during a given period.
hired by all the firms in the economy
What are the three sources of global investment funds?
household savings, government budget surplus, and borrowing from the rest of the world
The flow of funds from __________ into the financial system makes it possible for government and firms to borrow.
households
A depository institution takes deposits from ______ and earns most of its income by _______.
households and firms; making loans and buying securities that earn a higher interest rate than that paid to depositors
In the long run, the amount of investment a firm can make is dependent on:
the amount of household savings
The amount by which consumption spending increases when disposable income increases is called __________.
the marginal propensity to consume
New classical theorists believe that:
the uneven pace of technological change is the most significant cause of business cycle fluctuations.
When the interest rate decreases, __________.
there is movement down a stationary money demand curve
If the MPC is 0.8, then a $100 million increase in government expenditures will increase equilibrium GDP by __________.
$500 million
If the marginal propensity to consume (MPC) is 0.9, how much additional consumption will result from an increase of $100 billion in disposable income?
$90 billion
The currency drain ratio for M1 is ______ than for M2, and the banks' reserve ratio for M1 is ______ than for M2.
. larger; larger
An economy with no income taxes or imports has a marginal propensity to consume of 0.75. The multiplier in the long run is _______.
0
If disposable income increases from $4 trillion to $7 trillion, consumption expenditure increases from $3.5 trillion to $5.5 trillion, and nothing else changes, the marginal propensity to consume is _____.
0.67
The table gives you information about the economy of Australia. Calculate the value of consumption expenditure at each value of disposable income and fill in the right column of the table. The marginal propensity to consume is _____.
0.7
Using PPP prices, China's standard of living in 2010 is $___
11000
An economy has a consumption function of C = 10 + 0.8Y, investment of 6, government expenditure of 10, exports of 10, and an import function of M = 0.1Y. What is equilibrium real GDP?
120
In 2013 and in 2014, consumers in Dexter consumed only books and pens. The prices and quantities for 2013 and 2014 are listed in the table. The reference base period for Dexter's CPI is 2013 and 2013 is also the year of the Consumer Expenditure Survey. The CPI in 2014 is ______.
128.0
An economy has a consumption function of C = 10 + 0.8Y, investment of 6, government expenditure of 10, exports of 10, and an import function of M = 0.1Y. If government expenditure increases to 15, what is the increase in equilibrium expenditure?
16.65
The BLS reported the CPI data shown in the table to the right. Calculate the inflation rates for the years ended December 2016 and December 2017. The inflation rate in the year ended December 2016 was ___ percent per year. The inflation rate in the year ended December 2017 was ___ percent per year. How did the inflation rate change in the year ended December 2017? The inflation rate _____ .
2.1 2.1 didn't change
The level of disposable income at which all disposable income is consumed is $____ million.
200
The figure illustrates the components of aggregate planned expenditure on Turtle Island. Turtle Island has no imports or exports, no income taxes, and the price level is fixed. When real GDP is $6 billion, what is aggregate planned expenditure? Are inventories increasing or decreasing? When real GDP is $6 billion, aggregate planned expenditure is $__ billion. If real GDP is $6 billion, inventories are ________. If real GDP is $4 billion, inventories are
5.6 increasing decreasing
In 2013 and in 2014, consumers in Dexter consumed only books and pens. The prices and quantities for 2013 and 2014 are listed in the table. The reference base period for Dexter's CPI is 2013, and 2013 is also the year of the Consumer Expenditure Survey. The inflation rate in 2014 is ______ percent.
61.2
Which of these is a financial institution?
A commercial bank
Which of these statements about autonomous expenditure is correct?
Autonomous expenditure does not depend on the level of GDP.
The figure illustrates the components of aggregate planned expenditure on Turtle Island. Turtle Island has no imports or exports, no income taxes, and the price level is fixed. Calculate autonomous expenditure and the marginal propensity to consume in Turtle Island.
Autonomous expenditure is $2 billion. The marginal propensity to consume is .6.
Choose the statement that is incorrect.
Coins, which are issued by the Treasury are an asset of the Fed and a component of the monetary base.
Choose the correct statement.
Commercial banks are financial institutions that accept deposits, provide payment services, and make loans to firms and households.
Planned saving + Planned consumption expenditure = ______.
Disposable income
When the economy is at full employment, which types of unemployment remain?
Frictional and structural
The bias in the CPI is a problem because ______ .
It distorts wage agreements linked to the CPI
How can the change in U.S. wealth differ from U.S. saving?
The change in wealth includes changes in the prices of assets owned and saving excludes these items.
Choose the statement that is incorrect.
The demand for labor is the relationship between the quantity of labor demanded and the money wage rate.
If technological change increases the profitability of new investment to firms, which of these will occur?
The demand for loanable funds will increase.
The real interest rate is:
The nominal interest rate minus the inflation rate.
The table gives information about the U.S. labor market in 2001. What is the number of people unemployed?
The number of people unemployed is 6.8 million.
Choose the statement about an increase in the population that is incorrect.
The production function shifts upward.
Choose the correct statement.
The quantity of real GDP demanded is the sum of the real consumption expenditure, investment, government expenditure, and exports minus imports.
How would a reduction in income tax rates affect the loanable funds market?
The supply of loanable funds would increase.
An economy is at full employment when ______.
The unemployment rate equals the natural unemployment rate.
Choose the statement that is incorrect.
The unemployment rate includes all underutilized labor.
Which of these determines the supply of loanable funds?
The willingness of households and governments to save
The table gives information reported by the Bureau of Labor Statistics for October, 2008. What is the employment-to-population ratio?
The employment-to-population ratio is 61.7 percent.
A share of stock is __________.
a certificate of ownership and claim to the firm's profits
A higher exchange rate will result in:
a decrease in net exports and a decrease in aggregate demand
The 1974-1975 recession was a result of a:
a leftward shift of the short-run aggregate supply curve
A mortgage is _______.
a legal contract that gives ownership of a home to the lender in the event that the borrower fails to meet the agreed loan payments (repayments and interest)
Possible reasons for the difference could be _______.
a lower return to saving
Deflation is _______.
a persistently falling price level
You observe that unplanned inventories are increasing. You predict that there will be _______.
a recession
The graph shows that Japan has an output gap that is __________ gap of $100 trillion
a recessionary
The economy has ______.
a recessionary gap of $50 billion
The output gap in the graph is ______ because ______.
a recessionary gap; potential GDP exceeds real GDP
Cost-push inflation might start with:
a rise in money wage rates
The mainstream business cycle theories all assert that the main factor leading to business cycles is fluctuations in the growth of
aggregate demand
The business cycle occurs because ______.
aggregate demand and short-run aggregate supply fluctuate, but the money wage rate does not adjust quickly enough to keep real GDP at potential GDP
At points above the 45 degree line in the AE model:
aggregate planned expenditure is greater than GDP.
If the U.S. exchange rate changes from $1.00 Canadian to $1.05 Canadian, then the U.S. dollar has _______ and the Canadian dollar has _______.
appreciated; depreciated
Fluctuations in total spending in the economy may affect:
both employment and production in the short run.
An increase in the real interest rate will:
cause a movement along the demand curve for loanable funds
As a result of financial innovation, ______ have become ______.
checking deposits at thrift institutions; an increasing percentage of M1
The deposits of the following three types of depository institutions make up the nation's money: ______.
commercial banks, thrift institutions, and money market mutual funds
The most important determinant of consumption is __________.
current disposable income
Currently, the United States is a
debtor nation
Suppose the Fed sells $50 million of government securities to the Bank of America. The Fed's total assets ______ and its total liabilities ______.
decrease by $50 million; decrease by $50 million
Read the news clip, then answer the following questions. FDIC insurance helps to minimize bank failures and bring more stability to the banking system because _______.
depositors know that money they have deposited with a bank will be repaid
The decline in capital's value over a period of time is known as __________.
depreciation
The ratio of reserves to deposits that a bank plans to hold is its ______. If a bank has $10 million in actual reserves and $8 million in desired reserves, then it has ______.
desired reserve ratio; excess reserves
The consumption function is the relationship between consumption expenditure and _____, other things remaining the same.
disposable income
The relationship between saving and _____, other things remaining the same, is called the saving function.
disposable income
The best measure of the income households actually have available to spend is:
disposable personal income
The Bank of America's total assets ______ and its total liabilities ______
do not change; do not change
A rise in the money wage rate ______.
does not change the LAS curve because along the LAS curve a rise in the money wage rate is accompanied by an equal percentage change in the price level
Purchasing power parity _____ hold between Brazil and the United States PPP predicts that the Brazilian real will ______ against the U.S. dollar
does not; depreciate
The table provides some data on real GDP and the population of Eastiana in 2009 and 2010. If the growth rates of 2010 are maintained in future years, real GDP per person in Eastiana will ______.
double by 2024
The table provides some data on real GDP and the population of Asiana in 2010 and 2011. If the growth rates of 2011 are maintained in future years, real GDP per person in Asiana will ______.
double by 2034
Assuming there are no leakages out of the banking system, a money multiplier equal to 5 means that:
each additional dollar of reserves creates $5 of deposits.
The Ricardo-Barro effect _____ crowding out.
eliminates
An increase in labor productivity increases potential GDP because ______.
employment increases and a given amount of employment produces more real GDP
When the unemployment rate ______ the natural unemployment rate, real GDP ______ potential GDP.
equals;equals
The __________ links the quantity of money, velocity of circulation, price level, and real GDP.
equation of exchange
To calculate the multiplier, we divide ______ by ______.
equilibrium expenditure; the change in autonomous expenditure
The supply of loanable funds is influenced by all of the following except ______.
expected profit
When aggregate demand increases, unemployment will usually __________ and inflation will __________.
fall, rise
The consumer price index is an index computed using prices of a __________.
fixed basket of goods and services purchased by the typical consumer
The aggregate production function is the relationship that tells us ______, when all other influences on production remain the same.
how real GDP changes as the quantity of labor changes
The multiplier is greater than 1 because the change in autonomous expenditure leads to _______.
more induced expenditure
The defining characteristic of long-run economic growth is:
rising productivity
If the interest rate is 5 percent, people will ______ bonds. Bond prices will ______. The interest rate will ___.
sell; fall; rise
The long-run aggregate supply curve:
shifts to the right as technological change occurs
An unexpected change in the price of oil would cause a shift of the _______ curve.
short-run aggregate supply
The aggregate demand and aggregate supply model explains:
short-run fluctuations in real GDP and the price level
During the past decade, a nation's average annual rate of population growth was 4 percent, and its average annual real GDP growth rate was 1 percent. Thus, the average annual rate of growth in per capita real GDP was __________.
-3.0 percent
The equation of the aggregate expenditure curve is given by _______.
AE = A + [b(1-t)-m]Y
If in the long run, the U.S. dollar appreciates against the Japanese yen, then ______.
Japan has created money at a faster pace than has the United States, and the price level in Japan has risen more rapidly than the U.S. price level
Choose the statement about the Consumer Price Index that is incorrect.
The CPI is defined to equal 1.00 for a period called the reference base period.
Did the U.S. dollar appreciate or depreciate against the Canadian dollar?
The U.S. dollar depreciated against the Canadian dollar.
So, as the price level rises, there is ______.
a decrease in the quantity of real GDP demanded
According to real business cycle theory, a major source of fluctuations in economic activity is __________.
changes to technology
Aggregate demand increases if fiscal policy ______ taxes or ______ transfer payments.
decreases; increases
Between October 2017 and February 2018, the real interest rate ___
increased
Deflation occurs when _______.
aggregate demand increases at a persistently slower rate than aggregate supply
Equilibrium expenditure is the level of aggregate expenditure that occurs when ______.
aggregate planned expenditure equals real GDP
During the 100 years from 1914 to 2014, real GDP per person in the United States grew at ______.
an average of 2 percent a year
In the United States, the CPI basket consists of items that ______ . ______ has the greatest weight in the CPI basket.
an average urban household buys; Housing
In the United States, the CPI basket consists of items that ______ . ______ has the greatest weight in the CPI basket.
an average urban household buys; Housing
You observe that unplanned inventories are decreasing. You predict that there will be _______.
an expansion
Examples of fiscal policy that increase aggregate demand include ______.
an increase in government expenditure, a decrease in taxes, and an increase in transfer payments
When labor productivity increases, there is _____ the production function and _____ in potential GDP.
an upward shift of; an increase
At arrow 2, the economy is in ______ full-employment equilibrium and the intersection of the AD and SAS curves is to the ______ of the LAS curve.
an above; right
This change in consumption expenditure could be attributed to ______ in disposable income or ______ in expected future income.
an increase; an increase
Suppose that Sara withdraws $1,000 from her savings account at the Lucky S&L, keeps $50 in cash, and deposits the balance in her checking account at the Bank of Illinois. The immediate change is ______ in M1 of $1,000 and ______ in M2.
an increase; no change
The vertical distance between the horizontal line and point 3 is _____ gap. At point 3, the intersection of the AD and SAS curves is to the _____ of the LAS curve
an inflationary; right
An economy is in a long-run equilibrium. An increase in aggregate demand creates ______ gap. A rise in the money wage rate decreases ______ and returns the economy to a full-employment equilibrium.
an inflationary; the quantity of real GDP demanded
The theory of purchasing power parity states that __________.
arbitrage equalizes the value of monies
China fixes its exchange rate ______.
as a way of achieving a low inflation rate
The multiplier is the amount by which the change in ______ expenditure is magnified or multiplied to determine the change in equilibrium expenditure and real GDP. For every dollar increase in ______ expenditure, the multiplier determines the increase in real GDP.
autonomous; autonomous
The reference base period for the CPI is 1982-1984. In February 2014, the CPI was 234.8. This number tells us that the ______ of the prices paid by urban consumers for a fixed basket of consumer goods and services was ______ .
average; 134.8 percent higher in February 2014 than the average of 1982-1984
A central bank is ______. The central bank in the United States is the ______.
a bank's bank and a public authority that regulates a nation's depository institutions and conducts monetary policy; Federal Reserve System
At arrow 1 in the graph, the economy is in ______ full- employment equilibrium and the intersection of the AD and SAS curves is to the ______ of the LAS curve.
a below; left
If the government increases its expenditure on goods and services and as a result, the money wage rate increases, the economy has experienced _______.
a demand-pull rise in the price level
In the graph, the vertical distance between the horizontal line and point 2 is _____ gap. At point 2, the intersection of the AD and SAS curves is to the _____ of the LAS curve.
a recessionary; left;
In an economy, there is $75 million in currency held outside banks, $75 million in traveler's checks, $250 million in currency held inside the banks, $200 million in checking deposits, $800 million in savings deposits, $2,000 million in time deposits, and $800 million in money market mutual funds and other deposits. The value of M1 is ______ and the value of M2 is ______.
$350 million; $3,950 million
The personal consumption expenditure deflator is calculated as _______.
(Nominal C/Real C)x100
The marginal propensity to consume is 0.8, the marginal tax rate is 0.25, and the marginal propensity to import is 0.2. The autonomous tax multiplier is _______.
-1.33
The marginal propensity to consume is 0.8, the marginal tax rate is 0.20, and the marginal propensity to import is 0.14. The autonomous tax multiplier is _______.
-1.6
If the inflation rate is 6 percent and the nominal rate of interest is 4 percent, then the real interest rate is __________.
-2 percent
The table gives you information about the economy of Bluejay Island. What is the marginal propensity to save? The marginal propensity to save is ____.
.4
In an economy, when disposable income increases from $400 to $500, consumption expenditure increases from $420 billion to $500. What is the marginal propensity to consume, the change in saving, and the marginal propensity to save? The marginal propensity to consume is ____ When disposable income increases from $400 billion to $500 billion, saving increases by $___ billion. The marginal propensity to save is ____.
.8 20 .2
The marginal propensity to consume is ____. Autonomous consumption expenditure is $____ billion. Savings: ______ The marginal propensity to save is ____.
0.75 5 -5, 20, 45 0.25
The table gives you information about the economy of Bluebird Island. What is the marginal propensity to consume? The marginal propensity to consume is ___.
0.8
If the dollar price of a euro is $1.25, then the euro price of the dollar is __________.
0.80 euros
Using PPP prices, China's ranks as the world's number __ economy in 2010.
1
The variable... measures 1) U6-U5 2) U3-U1 3) U5-U3 4) U4-U3
1) "economic part-time workers" 2) "unemployed for less than 15 weeks" 3) "all marginally attached workers" 4) "discouraged workers"
The table provides information about three U.S. price indexes for December each year from 2011 to 2017. 1) In the year to December 2017, the inflation rate measured by the CPI was ___ percent. 2) In the year to December 2017, the inflation rate measured by the PCE was ___ percent. 3) In the year to December 2017, the inflation rate measured by the PCE less food and fuel was ___ percent. 4) The price index with the greatest bias is ______ because ______.
1) 2.1 2) 1.7 3) 1.5 4) the CPI; it isn't based on current period actual expenditure weights
The table provides information about the money wage rate and the CPI in the United States for the past five years. 1) In December 2017, the nominal wage rate was $____ per hour. 2) In December 2017, the CPI was ____. 3) In December 2017, the real wage rate was $____ per hour.
1) 30.74 2) 248.0 3) 12.40
The table provides some data on real GDP and the population of Asiana in 2009 and 2010. 1) What was the growth rate of real GDP in Asiana in 2010? 2) What was the growth rate of real GDP per person in Asiana in 2010?
1) The growth rate of real GDP in Asiana in 2010 is 3 percent. 2) The growth rate of real GDP per person in Asiana in 2010 was 2 percent.
The table provides some data on real GDP and the population of Pacifica in 2008 and 2009. 1) What is the growth rate of real GDP in Pacifica in 2009? 2) What is the growth rate of real GDP per person in Pacifica in 2009?
1) The growth rate of real GDP in Pacifica in 2009 is 13 percent. 2) The growth rate of real GDP per person in Pacifica in 2009 is 7 percent.
The table provides information about the U.S. CPI for December each year from 2011 to 2017. 1) The numbers in the table are ___ 2) The reference base year for the CPI is ____ 3) The CPI for December 2017 tells us that since the reference base year, the price level has increased by ___ percent. 4) In the year to December 2017, the inflation rate measured by the CPI was ___ percent.
1) price levels 2) 1982-1984 3) 148 4) 2.1
When the Fed buys securities from a bank, a sequence of events begins. The events are listed below. Number each event in the order in which it occurs.
1. Banks have excess reserves 2. Banks lend excess reserves 3. The quantity of money increases 4. New money is used to make payments 5. Some of the new money remains on deposit 6. Some of the new money is a currency drain 7. Desired reserves increase because deposits have increased 8. Excess reserves decrease
When the Fed buys securities from a bank, a sequence of events begins. The events are listed below. Number each event in the order in which it occurs.
1. Banks have excess reserves. 2. Banks lend excess reserves. 3. The quantity of money increases. 4. New money is used to make payments. 5. Some of the new money remains on deposit. 6. Some of the new money is currency drain. 7. Desired reserves increase because deposits have increased. 8. Excess reserves decrease.
What events in the foreign exchange market could have brought this fall in the value of the U.S. dollar?
1. World demand for U.S. exports decreases. Y 2. World demand for U.S. exports increases. N 3. U.S. import demand decreases. N 4. U.S. import demand increases. Y 5. The U.S. interest rate differential falls. Y 6. The U.S. interest rate differential rises. N 7. The expected future exchange rate falls. Y 8. The expected future exchange rate rises. N
An economy has a consumption function of C = 15 + 0.7Y, investment of 8, government expenditure of 12, exports of 20, and an import function of M = 0.2Y. What is equilibrium real GDP?
110
How many Federal Reserve districts are there?
12
In 2013 and in 2014, consumers in Dexter consumed only books and pens. The prices and quantities for 2013 and 2014 are listed in the table. The reference base period for Dexter's CPI is 2013 and 2013 is also the year of the Consumer Expenditure Survey. The CPI in 2014 is ______.
133.8
If a country's real GDP is growing at a rate of 5 percent per year, how long will it take for the real GDP to double?
14 years
If the cost of a market basket of goods in 1992, the base year, is $200, and the cost of the same market basket is $300 in 2008, what is the CPI in 2008?
150
The unemployment rate peaked ______ after the 2001 recession. During the 2002-2008 recession, the unemployment rate reached its lowest point at the beginning of ______.
18 months; 2007
Over the past 100 years, growth was most rapid during the ______ and slowest during the ______.
1960s; Great Depression
The table provides official estimates of U.S. wealth and U.S. saving in three years. The change in U.S. wealth exceeds U.S. saving in ______. U.S. saving exceeds the change in U.S. wealth in ______.
1997 and 1998; none of the years in the table
An economy has a consumption function of C = 15 + 0.7Y, investment of 8, government expenditure of 12, exports of 20, and an import function of M = 0.2Y. What is the multiplier for this economy?
2
Over the past 100 years, the average growth rate of U.S. real GDP per person is __ percent.
2
An economy has a consumption function of C = 15 + 0.7Y, investment of 8, government expenditure of 12, exports of 20, and an import function of M = 0.2Y. If government expenditure increases by 10, what is the increase in equilibrium expenditure?
20
Suppose that in 2014 China's real GDP is growing at 11 percent a year and its population is growing at 1.0 percent a year. If these growth rates continue, then China's real GDP per person in ______ will be twice what it is in 2014.
2021
The Population Survey in Blogsville for the past month is given in the table: In Blogsville last month, ______ million people were in the labor force and ______ million people were in the working-age population.
27;58
An economy has a consumption function of C = 10 + 0.8Y, investment of 6, government expenditure of 10, exports of 10, and an import function of M = 0.1Y. What is the multiplier for this economy?
3.33
If real GDP per person doubles in 20 years, then the annual growth rate of real GDP per person is ______ percent a year.
3.5
The quantity of real GDP at the short-run macroeconomic equilibrium is $___ billion.
450
According to the rule of 70, if a nation's per capita real GDP doubled during the past 10 years, then its average annual rate of economic growth over that period was approximately __________.
7 percent
Which of these factors will cause the aggregate demand curve to shift?
A change in the expectations of households and firms
Choose the statement that is incorrect.
A country with a large population cannot have a high standard of living.
Choose the statement about a crawling peg that is incorrect.
A crawling peg makes the exchange rate fluctuate wildly.
Which of these factors will shift the short-run aggregate supply to the left?
A decrease in the size of the labor force
Choose the statement that is incorrect.
A government budget surplus competes with investment for funds.
What is the relationship between real interest rates and investment, other things being equal?
A negative relationship
Which of these persons is officially unemployed?
A non-working individual who has looked for a job in the past week
Which of these will cause the quantity of goods and services that can be produced by one worker, or in one hour of work, to increase?
A technological change
Choose the statement that is incorrect.
A wage contract linked to the CPI gives the workers less real income than the firm intended.
An economy has a consumption function of C = 10 + 0.8Y, investment of 6, government expenditure of 10, exports of 10, and an import function of M = 0.1Y. What is the equation of the aggregate expenditure curve?
AE = 36 + 0.7Y
The equation of the aggregate expenditure curve is given by _______.
AE = A + [b(1minust)minusm]Y
What happens when there is an unplanned decrease in inventories?
Actual investment is less than planned investment.
Choose the statement that is incorrect.
Against the Chinese yuan, the dollar appreciated between 2005 and 2014.
Choose the statement that is incorrect.
Along the SAS curve, the real wage rate and the price level change by the same percentage
Choose the statement that is incorrect.
Along the SAS curve, the real wage rate and the price level change by the same percentage.
Which of these will shift the money demand curve to the right?
An increase in real GDP
Choose the statement about the long-run Phillips curve that is incorrect.
An unexpected increase in aggregate demand shifts the long-run Phillips curve rightward.
Choose the statement that is incorrect.
An unexpected inflation or deflation has no effect on the economy.
Which of these are financial instruments that represent promises to repay a fixed amount of funds?
Bonds
Did the events you've described change the demand for U.S. dollars, the supply of U.S. dollars, or both demand and supply in the foreign exchange market?
Change in world demand for U.S.exports D Change in U.S.import demand S Change in U.S. interest rate differential B Change in expected future exchange rate B
Choose the statement that is incorrect.
Classical growth theory tells us that technological change induces a level of saving and investment that makes capital per hour of labor grow indefinitely.
Choose the statement that is incorrect.
Comparisons of real GDP between countries are most accurate when we use market prices.
Which of the following fiscal policies combats inflation?
Decreasing government spending
The marginal propensity to consume is equal to ______, and the marginal propensity to save is equal to ______
DeltaC / DeltaYD; Delta S / DeltaYD
Choose the statement that is incorrect.
Deposits are not money because you cannot settle a debt with a deposit.
Choose the correct statement.
Deposits are money, checks are not money, and credit cards are not money.
Which of these factors inhibit economic growth?
Discouraging international trade
Choose the statement that is incorrect.
Each additional hour of labor increases real GDP by successively larger amounts.
The liabilities of the Fed are ______, and these liabilities along with ______ make up the monetary base.
Federal Reserve notes held by households and businesses and reserves of depository institutions; coins issued by the Treasury
Suppose a Canadian dollar bank deposit in Toronto earns 2 percent a year and a U.S. dollar bank deposit in Chicago earns 1 percent a year. What expectations do people hold if interest rate parity is to hold?
For interest rate parity to hold, people expect that the U.S. dollar will appreciate appreciate depreciate by 1 percent a year.
Suppose a Canadian dollar bank deposit in Toronto earns 3 percent a year and a U.S. dollar bank deposit in Chicago earns 4 percent a year. What expectations do people hold if interest rate parity is to hold?
For interest rate parity to hold, people expect that the U.S. dollar will depreciate by 1 percent a year.
The unemployment that arises from normal labor turnover -- from people entering and leaving the labor force -- and from the ongoing creation and destruction of jobs is ______ unemployment.
Frictional
The news article reports that China is the second largest economy in the world based on ______.
GDP converted to U.S. dollars at the current exchange rate
Read the news clip, then answer the following questions. The article defines productivity as ______. Real GDP per person is ______.
GDP divided by the number of people employed; real GDP divided by the population
The quantity of money is $ 4 billion and the velocity of circulation is 5. What is GDP?
GDP is $20 billion
Which of the following shifts the aggregate demand curve rightward year after year?
Growth in the quantity of money
Which of these predictions can be made using the growth rates associated with the equation of exchange?
If the money supply grows at a faster rate than real GDP, there will be inflation.
Suppose that potential GDP and the velocity of circulation are constant. What is the change in the price level in the long run if the quantity of money increases by 3 percent a year?
If the quantity of money increases by 3 percent a year, in the long run the change in the price level is 3 percent a year.
Which of these statements about interest rates and inflation is true?
If there is zero inflation, the nominal interest rate is equal to the real interest rate.
If real GDP increases by $2 million and potential GDP increases by $3 million and the marginal propensity to import is 0.2, by how much do imports change?
Imports increase by $400,000
Which of these government policies can help economic growth?
Improving the quality of education
The table shows the quantities of the components of M1 and M2 in January 2018.
In January 2018, M1 was $3648 billion. In January 2018, M2 was $13838.3 billion
The table above provides information about the U.S. labor market in January comma 2017, December, 2017, and January, 2018. The graph shows the unemployment rate since January, 2013.
In January, 2018 the number employed increased and the unemployment rate did not change. Over the year since January, 2017 the number employed increased and the unemployment rate decreased
Choose the statement about the business cycle that is incorrect.
In a business cycle, real GDP shows steady growth and steady inflation.
Choose the statement that is incorrect.
In a deflation, the inflation rate is positive but decreasing in consequent years.
Choose the statement that is incorrect.
In the United States in 2009, 22 million fewer people had jobs than in 1989.
Choose the statement that is incorrect.
In the long run, a change in the nominal exchange rate brings an equivalent change in the real exchange rate.
According to the graph, an increase in government spending, all else equal, will shift the AD curve from the initial AD curve to the curve labeled:
Increased AD
The table above and graph to the right provide information about the U.S. labor market in January, 2018.
In January, 2018, the labor force participation rate in the United States was 62.7 percent.
The table above and graph to the right provide information about the U.S. labor market in January, 2018.
In, January comma 2018, the unemployment rate in the United States was 4.1 percent.
According to _______ cycle theory, fluctuations in aggregate demand are primarily caused by fluctuations in confidence.
Keynesian
The ______ macroeconomic school of thought justifies the policy discussed in this news clip.
Keynesian
Read the news clip, then answer the following question. Based on this news clip, Paul Krugman most likely follows the ______ school of thought and Ben Bernanke most likely follows the ______ school of thought.
Keynesian or new Keynesian; Keynesian or new Keynesian
__________ advocates active government intervention via fiscal policy when the economy is in recession.
Keynesian theory
Choose the statement that is incorrect.
Labor hours are all equally productive.
Which of the following statements about the monetarist view of the macroeconomy is incorrect?
Left alone, the economy rarely operates at full employment.
Choose the statement that is incorrect.
Liquid assets have a higher interest rate than securities.
Which of these factors could have caused the increase in supply shown in this graph?
Lower U.S. interest rates
Which of these shifts the aggregate demand curve to the right?
Lower interest rates
What is the relationship between investment and real interest rates, all other things being equal?
Lower interest rates stimulate investment.
The equation of exchange is:
M x V = P x Q
The sum of all currency in the hands of the public, checkable deposits and traveler's checks is the official definition of __________.
M1
The value of the multiplier is larger when the value of the __________.
MPC is larger
Which of the following equations is incorrect?
MPC + MPS = DeltaYD
Which of the following equations is incorrect?
MPC + MPS = Upper DeltaYD
The process by which competition for profits leads to technological progress and perpetual economic growth best fits which growth theory?
New growth theory
Is it likely that all the points in the graph to the right lie on the same consumption function?
No, because the real interest rate, wealth, and expected future income changed
The table to the right shows the values of disposable income and consumption expenditure for each of the past four quarters. Could these levels of disposable income and consumption expenditure be on the same consumption function? ___ because consumption expenditure changed by _____ than disposable income in _______ .
No; more; 2017; Q4
Choose the statement that is incorrect.
Over the business cycle, aggregate supply fluctuates around potential GDP.
The bank plans to hold $3 for every $100 in deposits. The bank holds desired reserves of $13,000 and actual reserves of $22,000. What is the bank's desired reserve ratio and its excess reserves?
The bank's desired reserve ratio is 3 percent. The banks excess reserves are $9,000.
The bank plans to hold $5 for every $100 in deposits. The bank holds actual reserves of $17,000 and desired reserves of $10,000. What is the bank's desired reserve ratio and its excess reserves?
The bank's desired reserve ratio is 5 percent. The banks excess reserves are $7000.
The table gives information about the U.S. labor market in 2007. What is the employment-to-population ratio?
The employment-to-population ratio is 63.0 percent.
Suppose you are available for work but have not looked for a job for at least the last four weeks because you believe that no jobs are available. You would then be counted as __________.
a discouraged worker
If a country has a deficit in its net exports, it means that this country imports __________.
a greater value of goods and services than it exports
Monetarism is a school of economic thought that favors:
a monetary growth rule.
The effect of the United States returning millions of workers to their countries of origin is _____ the U.S. PF and _____ in potential GDP.
a movement down along; a decrease
The best forecast available, which is based on all the relevant information is called _______.
a rational expectation
When aggregate planned expenditure is greater than real GDP, inventories are _______, so production ______ and inventories return to their target level as the economy moves to equilibrium expenditure.
below target; increases
In January 2018, the U.S. the unemployment rate was ______ the natural unemployment rate and in the fourth quarter of 2017 the output gap was ______.
below; zero
A business cycle can be described by the following sequence: ______ equilibrium, ______ equilibrium, ______ equilibrium.
below full-employment; full-employment; above full-employment
According to the graph, in this economy there will be a tendency for:
both wages and prices to rise over time
An increase in potential GDP increases ______.
both long-run aggregate supply and short-run aggregate supply
If workers and firms have rational expectations and wages and prices adjust quickly, an expansionary monetary policy will result in higher inflation;
but no change in the unemployment rate
Inflation expectations "become self-fulfilling" because consumers decide to _____, which ______.
buy more goods and services at today's lower prices; increases aggregate demand
Arbitrage is the practice of seeking to profit by _____ in one market and _____ in another related market.
buying; selling for a higher price
To increase the money supply, the Fed __________.
buys securities from the public
If the interest rate is 5 percent, people will ______.
buy bonds, bid up their price, and the interest rate will fall
The shift of the function in this graph could have been caused by a __________.
change in the MPC
An increase in investment shifts the AE curve upward by an amount equal to the ______, and shifts the AD curve rightward by an amount equal to the ______.
change in investment; change in investment times the multiplier
Labor supply growth is influenced by all of the following except_______.
changes in labor productivity
A ______ macroeconomist believes that the economy is self-regulating and always at full employment. A ______ macroeconomist believes the economy requires active help from fiscal policy and monetary policy to maintain full employment.
classical; Keynesian
Stagflation is a:
combination of inflation and recession
The components of aggregate expenditure that are influenced by real GDP are ______.
consumption expenditure and imports
Aggregate expenditure, or the total amount of spending in the economy, equals:
consumption spending plus planned investment spending plus government purchases plus net exports.
Aggregate planned expenditure is the sum of planned _____.
consumption expenditure, investment, government expenditure, and exports minus imports
Depository institutions provide four benefits, which are ______.
creating liquidity, lowering the cost of borrowing, lowering the cost of monitoring borrowers, and pooling risk
A decline in investment spending as a result of an increase in government spending and borrowing is known as:
crowding out
If increases in government budget deficits cause investment spending to fall it is known as __________.
crowding out
In the balance of payment accounts, the sum of exports minus imports, net interest income, and net transfers is called the __________.
current account balance
If the sum of net exports, net interest income received from abroad, and net transfer payments from abroad yields a negative number, we say that a country's __________.
current account is in deficit
Growth rates are calculated in a similar manner for all variables. Real GDP growth rate = [(Real GDP in ______ yearminusReal GDP in ______ year) divided by Real GDP in ______ year ] times 100.
current; previous; previous
The slow job growth and rise in unemployment after mid-2007 is most likely ______.
cyclical
At full employment, __________.
cyclical unemployment is zero
If real GDP and aggregate expenditure are less than equilibrium expenditure, firms' inventories _______. Firms ______ production, and real GDP ______.
decrease increase; increases
In the short run, an unexpected decrease in oil prices will:
decrease the price level but increase real GDP
In January 2017, the U.S. unemployment rate was 4.8 percent. In January 2018, the unemployment rate was 4.1 percent. Assuming that the labor force remained constant between January 2017 and January 2018, then unemployment _______.
decreased
The expectations about the exchange rate ______ the demand for U.S. dollars and ______ the supply of U.S. dollars.
decreased; increased
The requirement to hold more capital can make financial institutions safer because by using more of its own funds and less borrowed funds, a financial institution ______.
decreases its risk of insolvency
An increase in expected future income _____.
decreases the supply of loadable funds today because households with larger expected future income will save less today
An increase in expected future income ______.
decreases the supply of loanable funds today because households with larger expected future income will save less today
Aggregate demand decreases if expected future income, inflation, or profits ______. And aggregate demand if fiscal policy ______ government expenditure.
decreases; decreases
The multiplier increases when the marginal propensity to import ______ or the income tax rate ______.
decreases; decreases
An increase in current income taxes ______ the supply of loanable funds today because it ______.
decreases; decreases disposable income, which decreases saving
A fall in the expected future exchange rate ______ the supply of U.S. dollars. An increase in the world demand for U.S. exports ______ the supply of U.S. dollars.
decreases; increases
Aggregate demand if monetary policy ______ the quantity of money and ______ interest rates.
decreases; increases
Aggregate demand increases if the exchange rate ______ or foreign income ______.
decreases; increases
An increase in current income taxes ______ the supply of loanable funds today because it ______.
decreases; decreases disposable income, which decreases saving
Potential GDP is ______.
determined by the full-employment quantity of labor
The Bank of America's total assets ______ and its total liabilities ______.
do not change; do not change
The graph _____ illustrate the law of supply of foreign exchange.
does
The Rule of 70 states that the number of years it takes for the level of any variable to ______ is approximately ______.
double; 70 divided by the annual percentage growth rate of the variable
Net exports is _____ of goods and services minus _____ of goods and services.
exports; imports
If these policies are successful, we would expect to see Oregon's natural unemployment rate ______.
fall
When aggregate planned expenditure is greater than GDP, inventories will __________ and GDP and total employment will __________.
fall, increase
In January 2010, the exchange rate was 91 yen per U.S. dollar. By September 2010, the exchange rate had fallen to 84 yen per U.S. dollar. As the exchange rate falls, the prices of foreign-produced goods and services to Americans ______ and the volume of U.S. imports ______.
fall; decrease
The consequences of deflation include all of the following except _______.
falling real wage rates for workers with long-term wage contracts
The real interest rate ______, household saving ______,
falls; decreases and investment increases
When the interest rate falls, other things remaining the same, the opportunity cost of holding money ______ and ______.
falls; the quantity of money demanded increases
An economy at a full-employment equilibrium experiences an increase in aggregate demand. The unemployment rate ______ its natural rate, and to return to the long-run equilibrium, the money wage rate begins to ______.
falls below; rise
Between 2007 and 2012, the U.S. exchange rate ______ against the Japanese yen because the U.S. interest differential _______ ______ against the yen.
fell; decreased and because currency traders expected the dollar to depreciate
In this graph, as the dollar depreciates __________.
fewer dollars are supplied
A __________ is one where the government or central bank determines their exchange rate by intervening in the foreign exchange market.
fixed exchange rate
A __________ is where a government or central bank intervenes in currency exchange markets and buy or sell currency in order to keep an exchange rate fixed or on a determined path.
fixed exchange rate or a crawling peg
A country that allows demand and supply to determine the value of its currency is said to have a __________.
flexible exchange rate
A crawling peg exchange rate policy is one that _______.
follows a path determined by a decision of the government or the central bank and is achieved by central bank intervention in the foreign exchange market
A monetary growth rule that might be supported by a monetarist would be a plan:
for the Federal Reserve to increase the quantity of money at a fixed rate and not respond to economic fluctuations.
The market in which the currency of one country is exchanged for the currency of another country is the ______. The price at which one currency exchanges for another currency is the ______.
foreign exchange market; exchange rate
The main type of unemployment that Governor Kulongoski is using policies to avoid is ______.
frictional and structural
The short-term unemployment that arises from workers, in the process of changing jobs, is called __________.
frictional unemployment
The unemployment that occurs with the normal workings of the economy, such as workers taking time to search for suitable jobs and firms taking time to search for qualified employees, is called:
frictional unemployment
The "normal or natural" underlying level of unemployment in the economy is the __________.
full employment rate of unemployment
The financial capital markets exist in order to __________.
funnel household savings to firms
Choose the statement that is incorrect. Older unemployed workers might become marginally attached workers or discouraged workers during a recession because _______.
given their long employment history, they are eligible for longer periods of unemployment benefits
The balanced budget multiplier equals the change in equilibrium expenditure and real GDP that results from equal changes in _____ divided by the change in government expenditure.
government expenditure and lump-sum taxes
When the unemployment rate is less than the natural unemployment rate, real GDP is ______ than potential GDP and the output gap is ______.
greater; positive
According to new growth theory, ______.
growth can persist indefinitely
In the long run, the rate of inflation is determined by the __________.
growth of the money supply
In neoclassical growth theory, ______.
growth will stop if technology stops advancing
According to real business cycle theory, shifts in aggregate demand:
have no impact on real GDP.
A firm that pays an efficiency wage is paying a wage that is __________ the current market wage.
higher than
If the minimum wage is set above the market-determined equilibrium wage, the natural unemployment rate will be __________.
higher than it would be without a minimum wage
The law of supply of foreign exchange states that other things remaining the same, the ______ the exchange rate, the ______ in the foreign exchange market.
higher; greater is the quantity of U.S. dollars supplied
The fundamental source of labor productivity growth is ______.
human capital
Unanticipated deflation __________.
hurts borrowers
If real GDP and aggregate expenditure are greater than equilibrium expenditure, firms' inventories ______. Firms _______ production, and real GDP _______.
increase decrease; decreases
Suppose the Fed buys $50 million of government securities from the Bank of America. The Fed's total assets ______ and its total liabilities ______.
increase by $50 million; increase by $50 million
The multiplier matters because we can use it to determine by how much we should change autonomous expenditure to ______.
increase real GDP by a given amount
An increase in household wealth will:
increase the consumption component of aggregate expenditure.
A federal government budget deficit will __________.
increase the demand for loanable funds and increase the equilibrium interest rate
If consumers in the United States decrease their demand for imports, the result will be to __________.
increase the exchange rate of the U.S. dollar
According to this news clip, consumption expenditure ________ as household wealth decreased.
increased
During the 1990s, the flow of foreign investment in the United States __________.
increased dramatically
An increase in expected future income _____ aggregate demand.
increases
An increase in expected future profits ______ aggregate demand.
increases
An increase in the expected future inflation rate ______ aggregate demand.
increases
Read the news clip, then answer the following question. A fall in inventories _______ aggregate demand.
increases
The multiplier increases when the marginal propensity to consume ____.
increases
Starting from a position of long-run equilibrium, an increase in government expenditures ______ real GDP and ______ the price level.
increases real GDP and raises the price level
Starting from a position of long-run equilibrium, a world expansion ______, and an increase in expected future profits ______.
increases real GDP and raises the price level; increases real GDP and raises the price level
A government budget deficit occurs, which ______. The real interest rate ______.
increases the demand for loanable funds; rises
Aggregate demand if fiscal policy ______ taxes or ______ transfer payments.
increases; decreases
Aggregate demand if the exchange rate ______ or foreign income ______.
increases; decreases
Aggregate demand increases if monetary policy ______ the quantity of money and ______ interest rates.
increases; decreases
An increase in the population ______ potential GDP and ______ potential GDP per hour of labor.
increases; decreases
Private saving _____ and investment _____
increases; decreases
Private saving _____ and investment _____.
increases; decreases
Yesterday, the current exchange rate was $0.95 Canadian per U.S. dollar and traders expected the exchange rate to remain unchanged for the next month. Today, with new information, traders now expect the exchange rate next month to rise to $1 Canadian per U.S. dollar. The revised expected future exchange rate ______ the demand for U.S. dollars and ______ the supply of U.S. dollars.
increases; decreases
Aggregate demand increases if expected future income, inflation, or profits ______. And aggregate demand increases if fiscal policy ______ government expenditure.
increases; increases
An increase in expected future income __________ aggregate demand. An increase in the expected future inflation rate ___________ aggregate demand. An increase in expected future profits _______ aggregate demand.
increases; increases; increases
An increase in real GDP ______ the demand for money and financial innovation ______.
increases; might increase the demand for some types of deposits and decrease the demand for others
According to Keynesian theory, fiscal policymakers can combat the impact of recessions by:
increasing government spending.
The only way that the standard of living of the average person in a country can increase is by:
increasing production faster than population growth
Consumption expenditure minus imports, which varies with real GDP, is called _______.
induced expenditure
A sustained increase in the overall level of prices is known as:
inflation
If the inflation rate is low, steady, and anticipated, __________.
inflation may not be a major problem
The percentage rate of change in the price level is the definition of the:
inflation rate
An increase in __________ will cause savings to increase.
interest rates
When the Federal Reserve Bank increases the federal funds rate, other
interest rates rise, and consumption, firms' private investment and net exports decrease
When the Federal Reserve Bank increases the federal funds rate, other
interest rates rise, and consumption, firms' private investment and net exports decrease.
In the short run, the quantity of real money and real GDP are given and the ______ adjusts to achieve equilibrium. In the long run, supply and demand in the loanable funds market determines the ______.
interest rate; real interest rate
If aggregate planned expenditure exceeds real GDP, then _______.
inventories decrease, and as real GDP increases a movement up along the AE curve occurs
If aggregate planned expenditure is less than real GDP, then _______.
inventories increase, and as real GDP decreases a movement down along the AE curve occurs
Stagflation ______.
is a combination of recession and inflation
One consequence of China operating a crawling peg is that China ______.
is accumulating U.S. dollars
A flexible exchange rate is one that _______.
is determined by demand and supply in the foreign exchange market with no direct intervention by the central bank
A fixed exchange rate is one that _______.
is set by the government or the central bank and is achieved by central bank intervention in the foreign exchange market
The natural unemployment rate _______.
is the unemployment rate when there is no cyclical unemployment.
The long-run Phillips curve __________.
is vertical at the natural rate of unemployment
Read the news clip, then answer the following questions. Barter ______ a means of payment. When trading on e-Bay, barter _______.
is; is not as efficient as money because barter requires a double coincidence of wants
If inflation is anticipated, __________.
it costs less to society than if unanticipated
If the economy moves into a recession, monetarists argue that the Fed should:
keep the money supply growing at a constant rate.
According to new growth theory, ______ experience diminishing returns.
knowledge is capital that does not
The ratio of the labor force to the adult population is known as the:
labor force participation rate
For a given increase in aggregate demand, the steeper the slope of the short-run aggregate supply curve, the ______ is the increase in the price level and the ______ is the multiplier effect on real GDP in the short run.
larger; smaller
When we say that one of the functions of the Fed is to be a lender of last resort, we mean that the Fed __________.
lends to banks that are short of reserves and cannot find any other source of funds
Suppose the Fed increases the quantity of money. In the long run, supply and demand in the ______ market determines the real interest rate. The ______ adjusts to make the quantity of real money supplied equal to the quantity demanded.
loanable funds; price level
On the balance sheet of commercials banks __________.
loans are the largest asset
The three main types of markets for financial capital are _______.
loan markets, bond markets, and stock markets
Read the news clip, then answer the following question. According to the news clip, the main source of increased unemployment might be ______, and the main type of increased unemployment is ______.
losses in manufacturing and construction jobs; cyclical
When interest rates on Treasury bills and other financial assets are low, the opportunity cost of holding money is __________ , so the quantity of money demanded will be __________.
low, high
The exports effect is the result that the lower the exchange rate, other things remaining the same, the ______.
lower are the prices of U.S.-produced goods and services to foreigners and the greater is the volume of U.S. exports
The imports effect is the result that the higher the exchange rate, other things remaining the same, the ______.
lower are the prices of foreign-produced goods and services to Americans and the greater is the volume of U.S. imports
If the government is attempting to spur investment spending it should adopt policies that are designed to:
lower interest rates
The __________ the interest rate, the more investment projects firms can profitably undertake, and the __________ the quantity of loanable funds they will demand.
lower, greater
The unemployment rate in the United States is usually __________ than the unemployment rates in most European countries, partly because the United States has __________ generous benefits for the unemployed.
lower, less
The MPS in the United States is _____ than the MPS in China, and the MPC in the United States is ______ than the MPC in China.
lower; higher
An increase in the population ____ the real wage rate.
lowers
A decrease in the marginal propensity to import _______, everything else remaining the same.
makes the multiplier larger
An increase in income taxes _______, everything else remaining the same.
makes the multiplier smaller
In calculating the CPI, the __________.
market basket does not include large equipment purchased by firms
The consumer price index __________.
measures the average of prices paid by urban consumers for a fixed basket of consumer goods and services
Money serves as a ______.
medium of exchange, which means that it is generally accepted in exchange for goods and services
The CPI in 2013 is 160 and the CPI in 2014 is 177.6. The inflation rate in 2014 is 11.0 percent. The inflation rate in 2014 ______.
might be higher, lower, or the same as in 2013
A rise in the price of oil:
might trigger a cost-push inflation
The school of thought that believes the activist policies of the Federal Reserve exacerbate economic fluctuations is __________.
monetarist cycle theory
The classical view assumes:
money wage rates adjust quickly.
The money multiplier is the ratio of the change in the quantity of ______ to the change in the quantity of ______.
money; monetary base
Other things remaining the same, when the U.S. price level rises, U.S.-made goods and services become ______ expensive relative to foreign-made goods and services. People spend ______ on U.S.-made items and ______ on foreign-made items. The quantity of U.S. real GDP demanded ________.
more; less; more; decreases
Between 1960 and 2010, the gap between real GDP per person in the United States and real GDP per person in Japan ______.
narrowed
At the point at which American consumers were consuming in the second and third quarters of 2011, saving is ______.
negative
If inflation is expected, _______.
neither a cost-push inflation nor a demand-pull inflation occur
China, Japan, and Saudi Arabia are ______. The United States is a ______.
net lenders; net borrower
A country that is borrowing more from the rest of the world than it is lending to the rest of the world is a ______, and a country that during its entire history has borrowed more from the rest of the world than it has lent to it is a ______.
net borrower; debtor nation
A country that is lending more to the rest of the world than it is borrowing from the rest of the world is a ______. A country that during its entire history has invested more in the rest of the world than other countries have invested in it is a ______.
net lender; creditor nation
The table shows three years of CPI data. The bias in these CPI numbers might arise from ______.
new goods bias, quality change bias, commodity substitution bias, and outlet substitution bias
A ______ macroeconomist believes that business cycle fluctuations are the efficient responses of a well-functioning market economy that is bombarded by shocks that arise from the uneven pace of technological change. A ______ macroeconomist believes that the short-run aggregate supply curve is horizontal at a fixed price level.
new classical; new Keynesian
Monetary stimulus designed to increase aggregate demand would have __________ on real output according to real business cycle theory.
no impact
The demand for money is the relationship between the quantity of real money demanded and the _____ when all other influences on the amount of money that people wish to hold remain the same.
nominal interest rate
The stated rate of interest on a loan is the __________.
nominal interest rate
Credit cards are:
not part of the money supply.
Choose the option that is incorrect. Equilibrium expenditure _______.
occurs when all expenditure is induced expenditure
Long-run macroeconomic equilibrium ______.
occurs when real GDP equals potential GDP, and the LAS, SAS, and AD curves intersect
The economy is in long-run equilibrium when the short-run aggregate supply and the aggregate demand curve intersect at a point:
on the long-run aggregate supply curve
When the dollar appreciates against the yen, __________.
one dollar will buy more yen
The sum of the marginal propensity to consume (MPC) and the marginal propensity to save (MPS) equals:
one.
If the CPI rises from 120 to 126, then ______.
on average, the price paid by urban consumers for a fixed basket of consumer goods and services rises by 5 percent
The Fed conducts monetary policy primarily through __________.
open market operations
To increase the money supply, the Fed may conduct
open market purchases or decrease the discount rate.
The private sector balance and the government sector balance tend to move in ______. Net exports respond ______.
opposite directions; to the sum of the government sector and private sector balances
Examples of physical capital are ______. Examples of financial capital are ______.
ovens used by Pizza Hut and lawn mowers used by Larry's Mowing; bonds issued by Wal-Mart and stocks issued by Boeing
Many economists believe the CPI __________ inflation because it fails to consider quality improvements in products.
overstates
Rapid inflation in Brazil in the early 1990s caused the cruzerio to lose its ability to function as money. Which of the following commodities do you think would most likely have taken the place of the cruzeiro in the Brazilian economy?
packs of cigarettes because they are a good medium of exchange
Some unemployment is unavoidable because ______.
people are making transitions through the stages of life and businesses are making transitions
Unemployment arises for all of the following reasons except ______.
people leave the labor force
Assume that the preconditions for labor productivity growth are in place. The pace of labor productivity growth is influenced by all of the following except ______.
population growth
The fundamental precondition for labor productivity growth is the incentive system created by all of the following except ______.
population growth
The output gap is the difference between __________.
potential GDP and actual GDP
In the long-run macroeconomic equilibrium, ______.
potential GDP and aggregate demand determine the price level, and the money wage rate adjusts so that the SAS curve intersects the LAS curve at the long-run equilibrium price level
Economic growth is the persistent increase in ______. Economic growth is accompanied by inflation when the ______.
potential GDP; AD curve shifts rightward at a faster rate than the LAS curve shifts rightward
When the real interest rate falls, the ______ because the ______ is the opportunity cost of loanable funds.
quantity of loanable funds demanded increases; real interest rate
The quantity of real GDP supplied depends on all of the following except the _______.
quantity of real GDP demanded
The theory concerning the link between the money supply and the price level that assumes the velocity of money is constant is called the __________.
quantity theory of money
Convergence between real GDP per person in the United States and Japan was relatively ______ during the 1960s; convergence has recently been ______.
rapid; decreasing
The ____ wage rate adjusts to bring the labor market to equilibrium.
real
The aggregate expenditure model focuses on the relationship between aggregate planned expenditure and __________.
real GDP
The gap between ______ is the output gap. When _____, the output gap is called an inflationary gap.
real GDP and potential GDP; real GDP exceeds potential GDP
Real GDP per person grows when ______.
real GDP grows at a faster rate than the population grows
Because the focus of long-run economic growth is on the standard of living of the average person, we measure the standard of living in terms of:
real GDP per capita
By measuring ______, we can see that the economy of Singapore has caught up to and surpassed the economy of the United States, but that the economies of Central and South America have not.
real GDP per person
The demand for labor is the relationship between the quantity of labor demanded and the ______. The supply of labor is the relationship between the quantity of labor supplied and the ______.
real wage rate; real wage rate
Between 1914 and 2014, the average growth rate of real GDP per person in the United States was 2 percent a year. During this period, ______ grew at a faster rate than ______.
real GDP; the population
The history of hyperinflations includes __________.
recent events. Hyperinflations have occurred in recent times as well as the past
A Phillips curve is a curve showing the __________.
relationship between the unemployment rate and the inflation rate
The name given to the fraction of deposits that a bank is legally required to hold in its vault, or as deposits at the Fed, is __________.
required reserves
In a demand-pull inflation, the AD curve shifts ____ and the SAS curve shifts ____.
rightward; leftward
When the real exchange rate decreases, a country's net exports will __________.
rise
On average in the United States, the inflation rate and the money growth rate minus the real GDP growth rate ______.
rise and fall together
When aggregate planned expenditures are less than the real GDP, inventories will:
rise.
As the price level rises, interest rates ____ and real wealth ______ People substitute goods in the ______ for goods in the ______.
rise; decrease future; present
According to classical growth theory, when real GDP per person ______, the population grows.
rises above the subsistence level
When the interest rate rises, other things remaining the same, the opportunity cost of holding money ______ and ______.
rises; the quantity of money demanded decreases
Between 2012 and 2014, the U.S. exchange rate ______ against the Japanese yen because the U.S. interest rate differential was expected to _______.
rose; increase
A ______ is a depository institution that accepts savings deposits and makes mostly home-purchase loans. A ______ is a depository institution owned by a social or economic group such as a firm's employees that accepts savings deposits and makes mostly personal loans.
savings bank; credit union
Suppose a country has a crawling peg exchange rate policy against the U.S. dollar and the equilibrium exchange rate in units of foreign currency per U.S. dollar is above the target rate. To keep the exchange rate pegged at its target level, the country's central bank must ______ U.S. dollars and ______ its foreign currency reserves.
sell; decrease
Suppose the exchange rate is 90 yen per U.S. dollar and the United States wants to keep the exchange rate at a target rate of 90 yen per U.S. dollar. If the demand for U.S. dollars increases, the Fed ______.
sells dollars to lower the exchange rate
A recession in the United States will __________.
shift the supply curve of dollars to the left
A rise in the price level _______.
shifts the AE curve downward and brings a movement up along the AD curve
An increase in labor productivity ______.
shifts the demand for labor curve rightward and the production function upward
An increase in the population ______.
shifts the supply of labor curve rightward and creates a movement along the production function
The U.S. M1 multiplier is ____ than the U.S. M2 multiplier.
smaller
If the Federal Reserve increases the money supply at 5% a year, in the long run there will be __________.
something less than 5% annual inflation
According to the graph, the situation of this economy after the supply shock can be called:
stagflation
An economy is at potential GDP when it experiences an increase in costs. The economy experiences _______.
stagflation
Keynes maintained that the economy could remain long-term at levels of output below the full-employment level of output due to:
sticky wages.
Unemployment arising from a persistent mismatch between the skills and characteristics of workers and job requirements is called __________.
structural unemployment
Suppose that the number of jobs in the fishing industry decreases but the number of jobs in the travel industry increases. Initially, ______.
structural unemployment increases
Older workers are more prone to experience ______ unemployment. During a recession, the unemployment rate of older workers ______.
structural; increases
A government budget surplus occurs, which increases the _____ loanable funds.
supply of
The quantity of labor supplied is the number of labor hour ______________________ during a given period.
that all the households in the economy plan to work
When the price level, the money wage rate, and other factor prices rise by the same percentage, there is a movement along ______. Potential GDP ______.
the LAS curve; does not change
When the price level rises but the money wage rate and other factor prices remain the same, there is a movement along ______. The quantity of real GDP supplied ______.
the SAS curve; increases
Read the news clip, then answer the following question. Mr. Reddy is investing in the U.S. real estate market because ______.
the U.S. dollar depreciated and the price of U.S. investment properties to foreign investors like Mr. Reddy decreased
The U.S. interest rate differential rises when ______.
the U.S. interest rate rises and the foreign interest rate falls
The price level is ______.
the average level of prices, and the value of money
The Federal Reserve System is __________.
the central bank of the United States
To calculate the multiplier, we divide ______ by ______.
the change in equilibrium expenditure; the change in autonomous expenditure
The marginal propensity to import is equal to _______.
the change in imports divided by the change in real GDP, other things remaining the same
The part of the balance of payments that records a country's exports and imports of goods and services is __________.
the current account
The quantity of U.S. dollars demanded in the foreign exchange market depends on many factors, the main ones being ______.
the exchange rate, world demand for U.S. exports, interest rates in the United States and other countries, and the expected future exchange rate
Economic growth is _______.
the expansion of production possibilities
Along the short-run Phillips curve, ______.
the expected inflation rate and the natural unemployment rate are constant
All of the following statements are included in new growth theory except ______.
the forces of competition destroy incentives to make new discoveries
When there is a shortage of dollars in the foreign exchange market, ______.
the forces of supply and demand pull the foreign exchange market into equilibrium
When there is a surplus of dollars in the foreign exchange market, ______.
the forces of supply and demand pull the foreign exchange market into equilibrium
The demand for U.S. dollars changes when there is a change in any of the following except ______.
the foreign exchange rate
The supply of U.S. dollars changes when there is a change in any of the following except ______.
the foreign exchange rate
The U.S. interest rate differential rises if ______, and the larger the U.S. interest rate differential, the ______ is the demand for U.S. dollars in the foreign exchange market.
the foreign interest rate falls; greater
The marginal propensity to save is _______.
the fraction of a change in disposable income that is saved
The marginal propensity to consume is ______.
the fraction of a change in disposable income that is spent on consumption
In the long-run, the level of output is:
the full-employment level of output
The fundamental precondition for labor productivity growth is _______.
the incentive system created by firms, markets, property rights, and money
When the price of an asset rises, ______.
the interest rate falls
If we count marginally attached workers as unemployed ______.
the labor force participation rate rises
One of the Fed's main policy tools is ______.
the last resort loan, which means that if a bank is short of reserves, it can borrow from the Fed
When real GDP increases, the change in consumption expenditure equals _______.
the marginal propensity to consume times the increase in real GDP
When real GDP increases, the change in consumption expenditure equals _______.
the marginal propensity to consume x the increase in real GDP
When real GDP increases, the change in imports equals _______.
the marginal propensity to import times the increase in real GDP
When real GDP increases, the change in imports equals _______.
the marginal propensity to import x the increase in real GDP
If real GDP increases:
the money demand curve shifts to the right.
Potential GDP increases for all of the following reasons except ______.
the money wage rate increases
A cost-push rise in the price level can arise from an increase in _______.
the money wage rate or money prices of raw materials
As we move up along the short-run aggregate supply curve, ______.
the money wage rate, the prices of other resources, and potential GDP remain constant
When cyclical unemployment increases and other things remain the same, ______.
the natural unemployment rate does not change
In the long run, ____ adjusts to make the quantity of real money supplied equal the quantity demanded.
the price level
In the long run, _____ adjusts to make the quantity of real money supplied equal the quantity demanded.
the price level
The CPI tells us ______.
the price level in a given period expressed as a percentage of the price level in the base period, which is by definition equal to 100
The quantity of U.S. dollars supplied in the foreign exchange market depends on all of the following except ______.
the price of gold
An open market operation is ______.
the purchase or sale of securities by the Federal Reserve System in the loanable funds market
At the equilibrium exchange rate _______.
the quantity of dollars demanded equals the quantity of dollars supplied
High inflation accompanies economic growth when ______.
the quantity of money increases rapidly
A stagflation can turn into a cost-push inflation process when _______.
the quantity of money persistently increases
When firms are unable to meet the demand for their output, _____. Prices _____.
the quantity of real GDP demanded is greater than the quantity of real GDP supplied; rise
An increase in the price level when the money wage rate remains unchanged increases ______.
the quantity of real GDP supplied
Everything else remaining the same, an increase in aggregate demand increases ______.
the quantity of real GDP supplied
When unwanted inventories pile up, _____. Prices _____.
the quantity of real GDP supplied is greater than the quantity of real GDP demanded; fall
With a rise in the money wage rate, ______.
the quantity that firms are willing to supply at each price level decreases
As we move up along the long-run aggregate supply curve, ______.
the real wage rate remains constant
For a given increase in the monetary base, ______.
the resulting increase in M2 is greater than the resulting increase in M1
All of the following statements are correct except _______.
the return to full employment in an expansion phase of the business cycle is economic growth
According to the graph, an increase in the quantity of money is best described by:
the shift in the AD curve
The quantity of U.S. dollars demanded in the foreign exchange market depends on all of the following except ______.
the supply of U.S. dollars in the foreign exchange market
The two broad sources of potential GDP growth are growth of ______ and growth of ______.
the supply of labor; labor productivity
If most prices increase in Japan and other countries but remain constant in the United States, ______.
then for purchasing power parity to hold, the demand for U.S. dollars increases and the supply of U.S. dollars decreases
If most prices have decreased in the United States and not decreased in Japan and other countries, ______.
then for purchasing power parity to hold, the value of the U.S. dollar in the foreign exchange market will rise
International evidence shows us that ______.
there is a general tendency for money growth and inflation to be correlated but the quantity theory does not predict inflation precisely
Actual investment will equal planned investment only when __________.
there is no unplanned change in inventory
According to theory regarding labor productivity growth, workers will be more productive if __________.
they have more human capital
When the Fed buys securities from a bank, ______.
the bank's reserves increase but its deposits do not change
The "capital" referred to in the news clip is ______. The financial institutions that the G-20 might require to hold more capital are ______.
the institutions' own funds; banks and insurance companies
If the natural unemployment rate increases and the expected inflation rate remains constant, then ______.
the long-run Phillips curve shifts rightward and the short-run Phillips curve shifts rightward
If the expected inflation rate increases and the natural rate of unemployment remains constant, then _______.
the short-run Phillips curve shifts upward and the long-run Phillips curve does not shift
Physical capital is ______. Financial capital is ______.
the tools, instruments, machines, buildings, and other items that have been produced in the past and that are used today to produce goods and services; the funds that firms use to buy physical capital
If the consumer price index was 73 in 1979 and 225 in 2011, then prices in 2011 were on average:
three times as high as 1979
Disoposable income is aggregate income minus taxes plus _____.
transfer payments
The natural rate of unemployment is the __________.
unemployment rate an economy will experience when real GDP equals potential GDP
The change in the unemployment rate over the past year suggests that the U.S. economy ______.
was in an expansion
The wealth effect refers to the fact that:
when the price level falls, the real value of household wealth rises, and so will consumption
The marginal propensity to consume is 0.8, the marginal tax rate is 0.20, and the marginal propensity to import is 0.14. The government increases government expenditure and autonomous taxes each by $50 billion. What is the resulting change in equilibrium expenditure?
$20 billion
The marginal propensity to consume is 0.8, the marginal tax rate is 0.25, and the marginal propensity to import is 0.2. The government raises autonomous taxes and government expenditure by $100 million each. The resulting change in equilibrium expenditure is _______.
$33.3 million
The table gives the aggregate expenditure schedule. Equilibrium expenditure is equal to _______.
$5 trillion
The money multiplier can be calculated as ______, where C is currency, D is deposits, and R is banks' reserves.
(1 + C/D) divided by (R/D + C/D)
In a standard of living comparison, China ranks ______ in the world. This rank is ______.
105th; rising because physical capital and human capital growth and technological change are proceeding rapidly and China's real GDP is growing
Cindy takes a summer job painting houses. During the summer, she earns an after-tax income of $3 comma 500 and she spends $1,000 on living expenses. What was Cindy's saving during the summer?
Cindy's saving during the summer was $2,500.
Once a month, the Bureau of ______ Statistics calculates the Consumer Price Index, which is a measure of the ______ consumers for a fixed basket of consumer goods and services.
Labor; average of the prices paid by urban
The multiplier is the amount by which a change in ______ expenditure is magnified or multiplied to determine ______.
autonomous; the change in equilibrium expenditure and real GDP
The expectations about the exchange rate ______ the demand for U.S. dollars and ______ the supply of U.S. dollars.
decreased; increased
The gap between real GDP per person in the United States and Hong Kong has ______ since 1960. During this period, the growth rate of real GDP per person in the United States has been ______ than in Hong Kong.
decreased; slower
An increase in the population ______ the real wage rate and ______ the equilibrium quantity of labor.
decreases; increases
If all (or most) prices have increased in the United States and not increased in Japan, then people will generally expect that the foreign exchange value of the dollar will ______. The demand for dollars ______.
fall; decreases and the supply of dollars increases
The real interest rate ______, household saving ______,
falls; decreases and investment increases
Between 2007 and 2012, the U.S. exchange rate ______ against the Japanese yen because the U.S. interest differential _______ ______ against the yen.
fell; decreased and because currency traders expected the dollar to depreciate
The law of demand for foreign exchange states that other things remaining the same, the ______ the exchange rate, the smaller is the ______ in the foreign exchange market.
higher; quantity of U.S. dollars demanded
Read the news clip, then answer the following questions. If speculation like that made by Mr. Reddy becomes widespread, the demand for U.S. dollars will ______ and the supply of U.S. dollars will ______. The U.S dollar exchange rate will _____.
increase; decrease rise
If an economy experiences a decrease in the money supply, short-run unemployment
increases, and short-run output decreases
Potential GDP ______ and potential GDP per hour of labor ______.
increases; decreases
An increase in U.S. demand for imports ______ the supply of U.S. dollars. A fall in the U.S. interest rate differential ______ the supply of U.S. dollars.
increases; increases
An increase in the population ______ the equilibrium quantity of labor, ______ and potential GDP.
increases; increases
If the price level rises and the money wage rate remains constant, the quantity of real GDP supplied ______ and there is a movement up along the ______ aggregate supply curve.
increases; short-run
For a given increase in aggregate demand, the steeper the slope of the short-run aggregate supply curve, the ______ is the increase in the price level and the ______ is the multiplier effect on real GDP in the short run.
larger; smaller
Read the news clip, then answer the following questions. The MPS in the United States is ______ today than it was before 1984, and the MPC in the United States is ______ today than it was before 1984.
lower; higher
The money multiplier is the ratio of the change in the quantity of ______ to the change in the quantity of ______.
money; monetary base
A Keynesian macroeconomist believes that left alone, the economy would _____ operate at full employment and that to achieve and maintain full employment, active help from fiscal policy and monetary policy is required. A modern version of the Keynesian view, known as the new Keynesian view, holds not only that the money wage rate is _____ but also that prices of goods and services are _____.
rarely; sticky; sticky
When the nominal interest rate rises, the opportunity cost of holding money ______ and the quantity of real money demanded ______.
rises; decreases
The business cycle is actually a continuous series of different ______.
short-run macroeconomic equilibriums
A change in the expected future exchange rate changes the demand for U.S. dollars ______, and a change in the world demand for U.S. exports changes the demand for U.S. dollars ______.
today; today
A change in the expected future exchange rate changes the supply of U.S. dollars ______, and a change in U.S. demand for imports changes the supply of U.S. dollars ______.
today; today
The CPI basket consists of items that urban households buy. The CPI places more weight on _______ than on _______.
transportation; medical care
A movement ______ along the short-run Phillips curve occurs when there is an ______ increase in aggregate demand.
up; unexpected
An increase in investment shifts the AE curve _______ and the AD curve _______.
upward; rightward
When real GDP decreases, ______.
a decrease in the demand for money occurs
The aggregate demand curve shows the relationship between:
The price level and the quantity of real GDP demanded
What influences consumption decisions and shifts the consumption function?
The real interest rate, wealth, and expected future income
Choose the statement that is incorrect.
The return to full employment in an expansion phase of the business cycle is economic growth.
Choose the statement that is incorrect.
The size of an economy is irrelevant.
The graph shows an economy that has no taxes or imports. AD0 is the aggregate demand curve when investment is $1.0 trillion, and AD1 is the aggregate demand curve when investment is $1.5 trillion. What is the size of the multiplier in the short run?
The size of the multiplier in the short run is 4.
If the government begins running a budget surplus, what impact will the surplus have on the loanable funds market?
The supply of loanable funds will increase.
The table gives information about the U.S. labor market in 2007. What is the unemployment rate?
The unemployment rate is 4.6 percent.
The table gives information reported by the Bureau of Labor Statistics for September, 2012. What is the unemployment rate?
The unemployment rate is 7.7 percent.
The table shows the amounts held as the various components of M1 and M2. What are the values of M1 and M2?
The value of M1 is $190 billion. The value of M2 is $985 billion.
Choose the statement about flexible exchange rates that is incorrect.
The world economy has operated a flexible exchange rate regime since the end of World War II.
Examples of monetary policy that decrease aggregate demand include ______.
a decrease in the quantity of money and an increase in interest rates
Which of these will ensure that an economy experiences labor productivity growth?
Technological change
Which of the following statements about the Keynesian view of the macroeconomy is incorrect?
Technological change is the most significant influence on both aggregate demand and aggregate supply.
Which of these factors contributes to economic growth?
Technological progress
A typical family on Sandy Island consumes only juice and cloth. Last year, which was the base year, the family spent $28 on juice and $18 on cloth. In the base year, juice was $4 a bottle and cloth was $2 a length. This year, juice is $8 a bottle and cloth is $6 a length. What is the CPI basket? What is the CPI and the inflation rate in the current year?
The CPI basket is 7 bottles of juice and 9 lengths of cloth. The CPI in the current year is 239.1. The inflation rate in the current year is 139.1 percent.
The people who live on Second Life Island consume only juice and cloth. Last year, which was the CPI base year, the price of juice was $3 a bottle, the price of cloth was $6 a length, and the average urban household spent $24 on juice and $42 on cloth. This year, the price of juice is $5 a bottle and the price of cloth is $3 a length. What is the CPI in the current year?
The CPI in the current year is 92.4.
Choose the statement that is incorrect.
The Congressional Advisory Commission on the Consumer Price Index in 1996 said that the CPI overstates inflation by 0.1 percentage points a year.
Which body of the Federal Reserve System sets the majority of U.S. monetary policy?
The Federal Open Market Committee
What are the values of the M1 money multiplier and the M2 money multiplier in January 2018?
The M1 money multiplier is 1.2 The M2 money multiplier is 4.4
In the United Kingdom, the currency drain ratio is 38 percent of deposits and the reserve ratio is 2 percent of deposits.
The U.K. money multiplier is 3.45
Did the U.S. dollar appreciate or depreciate against the Japanese yen?
The U.S. dollar depreciated against the Japanese yen.
Choose the statement that is incorrect.
The U.S. government cannot create jobs. Jobs are created by the private sector.
Suppose the United States goes from a free-trade policy to a no-trade policy with other countries. Which of the following is a result of this new policy?
The U.S. no longer consumes outside its production possibilities frontier
Choose the statement that is incorrect.
The United States and Great Britain were the only countries who suffered the Great Depression.
Which of these factors will cause the long-run aggregate supply curve to shift to the right?
The accumulation of more machinery and equipment
Rob takes a summer job with a landscaping firm. During the summer, he earns an after-tax income of $5,000 and he spends $1,000 on living expenses. Everything else remaining the same, what was the change in Rob's wealth during the summer?
The change in Rob's wealth is $4,000.
The left graph shows the consumption function and the right graph shows the saving function. Suppose there is a decrease in household wealth.
The consumption function shifts from A to B and the saving function shifts from C to D.
Choose the statement that is incorrect.
The core PCE is a broader measure than the CPI that attempts to overcome biases by placing extra emphasis on food and fuel, two goods which are large components of household expenditure.
Choose the statement about growth in labor productivity that is incorrect.
The demand for labor increases, the production function does not change, but a movement occurs along the production function.
If firms reduce investment spending and the economy enters a recession, which of these contributes to the adjustment that causes the economy to return to its long-run equilibrium?
The eventual agreement by workers to accept lower wages
The CPI in 2003 was 184.0. The CPI in 2004 was 188.9.
The inflation rate in 2004 was 2.7 percent.
Choose the correct statement.
The inflation rate is the annual percentage change in the price level.
Choose the statement that is incorrect.
The interest rate earned on a liquid asset is relatively high.
The table gives information reported by the Bureau of Labor Statistics for February, 2007. What is the labor force participation rate?
The labor force participation rate is 65.9 percent.
The table gives information about the U.S. labor market in 2002. What is the labor force participation rate?
The labor force participation rate is 66.6 percent.
One of the Fed's main policy tools is ______.
The last resort loan, which means that if a bank is short of reserves, it can borrow from the Fed
Choose the correct statement.
The level of aggregate expenditure that occurs where the AE curve intersects the 45degrees line is equilibrium expenditure.
The table gives you information about the economy of Bluebird Island. What is the marginal propensity to consume?
The marginal propensity to consume is 0.75.
The table gives you information about the economy of Bluejay Island. What is the marginal propensity to save?
The marginal propensity to save is 0.20.
The table gives you information about the economy of Australia. What is the marginal propensity to save?
The marginal propensity to save is 0.25.
In Australia, the quantity of M1 is $150 billion, the currency drain ratio is 33 percent of deposits and the reserve ratio is 8 percent.
The monetary base in Australia is $46.24 million
The currency drain ratio is 0.2 of deposits and the banks' reserve ratio is 0.5. What is the money multiplier?
The money multiplier is 1.7.
Suppose an increase in the monetary base of $200,000 increases the quantity of money by $400 comma 000. Calculate the money multiplier.
The money multiplier is 2.
Suppose an increase in the monetary base of $200,000 increases the quantity of money by $400,000. Calculate the money multiplier.
The money multiplier is 2.
Read the news clip, then answer the following question. A bank's attempts to pursue profit can sometimes lead to bank failure because _______.
a combination of all of the above
In an economy without taxes and imports, an increase in investment of $50 billion increases equilibrium expenditure by $100 billion. What are the values of the multiplier and the slope of the AE curve?
The multiplier is 2.0 and the slope of the AE curve is 0.5.
Choose the statement that is incorrect.
The nominal interest rate is the real interest rate adjusted to remove the effects of inflation on the buying power of money.
Choose the statement that is incorrect.
Real GDP per person grows whenever real GDP grows.
The Board of Governors of the Federal Reserve has _________ members that are appointed for staggered _________ by the __________ and confirmed by the Senate.
Seven, 14-year terms, President
On January 1, 2014, Sophie's Sunlounge owned 4 tanning beds valued at $20,000. During 2014, Sophie's bought 3 new beds at a total cost of $12,000. At the end of the year, the market value of all of Sophie's beds was $26,000. Calculate Sophie's gross investment and depreciation during 2014.
Sophie's gross investment during 2014 was $12,000. Sophie's depreciation during 2014 was $6,000.
On January 1, 2014, Sophie's Sunlounge owned 4 tanning beds valued at $20,000. During 2014, Sophie's bought 3 new beds at a total cost of $12,000, and at the end of the year the market value of all of Sophie's beds was $27,000. What was Sophie's net investment?
Sophie's net investment during 2014 was $7,000.
Choose the correct statements. 1. When a steel plant becomes more automated and workers lose their jobs comma the workers are structurally unemployed. 2. The fluctuating unemployment over the business cycle is cyclical unemployment. 3. The unemployment that arises from normal labor turnover is cyclical unemployment. 4. Structural unemployment increases during a recession and decreases during an expansion.
Statements 1 and 2 are correct.
Choose the statements concerning neoclassical growth theory that are true. 1. The rate of technological change influences the economic growth rate but economic growth does not influence the pace of technological change. 2. Technological change results from chance. nothing 3. Neoclassical growth theory implies that growth rates and income levels per person around the globe will diverge. nothing 4. Neoclassical growth theory states that growth in real GDP per person can persist indefinitely. nothing
Statements 1 and 2 are correct.
Choose the correct statements. 1. If $ 1 buys 100 yen comma then the exchange rate is 100 yen per dollar. nothing 2. In a growing economy comma the exchange rate is always rising. nothing 3. The foreign exchange market is a place. nothing 4. Upper A rise in the exchange rate is called an appreciation of the dollar. nothing
Statements 1 and 4 are correct.
A reason for the difference in the values between the countries may be ______.
U.S. consumers are more confident about the future
What is the impact of unanticipated inflation?
Unanticipated inflation creates arbitrary redistributions of income.
The Bureau of Labor Statistics reported the following data for January 2018. Labor force: 161,115 Employed: 154,430 Working-age population: 256,780 Use the above data to calculate for January 2018:
Unemployment rate: 4.1 percent Labor force participation rate: 62.7 percent Employment to population ratio: 60.1 percent
Velocity of circulation is defined as __________.
V = (P x Y) / M
Which one of these groups is most hurt by unanticipated inflation?
Wealthy people who hold cash in their wall safes
The table gives the elements of planned expenditure. Real GDP Consumption expenditure Investment Government expenditure Exports Imports (trillions of 2009 dollars) 0 0.2 0.4 0.2 0.9 0 4 2.3 0.4 0.2 0.9 0.2 When real GDP is $4 trillion, what are aggregate planned expenditure, autonomous expenditure, and induced expenditure?
When real GDP is $4 trillion, aggregate planned expenditure is $3.6 trillion. Autonomous expenditure is $1.7 trillion. Induced expenditure is $1.9 trillion.
If an economy is at a full-employment equilibrium and a decrease in consumption expenditure occurs, the new short-run equilibrium is _____ and _____ gap emerges.
a below full-employment equilibrium; a recessionary
An increase in labor productivity results in all of the following except ______.
a decrease in potential GDP per hour of labor because of diminishing returns
a. An unemployed auto assembly line worker during a sales slump. b. A snow plow driver during the summer. c. A record player repairman who has not learned the latest laser disk player repair technology. d. A computer programmer who quits his job to look for a job with better benefits. e. A high school dropout with few skills who has been looking for a job unsuccessfully for weeks. f. A person who leaves their job to attend graduate school full time. g. A recent business school graduate looking for her first job. h. A person whose job has been automated out of existence. i. A vendor who sells beer at major league baseball games during the winter months. j. A welder who finds that robots have replaced most of the welding jobs on assembly lines. k. A top salesman for a computer company who quit because he did not like his boss. l. A parent who quit to care for his or her child at home. This person has removed themself from the labor force
a. cyclical b. seasonal c. structural d. frictional e. structural f. not unemployed g. frictional h. structural i. seasonal j. structural k. frictional l. not unemployed
If inflation is anticipated to be 5 percent per year and actual inflation for that year turns out to be 7 percent, identify whether each of the following groups would be helped or hurt by this, or if the effort is indeterminate. a. People who are living on fixed incomes. b. Banks that have made long-term fixed rate loans. c. People who have purchased bonds. d. A person who has purchased real estate with a bank loan. e. A recent college graduate with many loans to pay back. f. People who have purchased stock. g. Governments that have sold bonds. h. Savers with open passbook accounts. i. People who have purchased precious metals. j. Wage earners who are members of a strong union.
a. hurt b. hurt c. hurt d. helped e. helped f. helped g. helped h. hurt i. helped j. indeterminate
